BlackBerry confirms it will finally stop making smartphones

The death march of BlackBerry’s handset business was closely chronicled by BGR for a long period of time. We gave the world an inside look at the company’s downfall after it failed to pivot when Apple’s iPhone changed the smartphone market, and now those early missteps have finally led to today. As BlackBerry reported a fiscal second-quarter net loss of $372 million on Wednesday morning, the company confirmed that it will cease all internal smartphone development and stop making smartphones.

BlackBerry CEO John Chen said last year that the company would exit the smartphone hardware business if it could not find a way to make it profitable, and today BlackBerry is taking its first step toward making good on that promise. Sadly, it likely won’t be the company’s last step. BlackBerry brand smartphones will continue to be released, for now, but BlackBerry will no longer develop them in-house. Instead, the company will concentrate on smartphone software and partner with other companies that will build and release hardware.

The company’s most recent handset — a rebranded Alcatel smartphone called the BlackBerry DTEK50 — was the first device to fit this new model.

“The company plans to end all internal hardware development and will outsource that function to partners,” BlackBerry CEO John Chen said following the company’s Q2 earnings release on Wednesday. “This allows us to reduce capital requirements and enhance return on invested capital.”

Chen continued, “We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold. In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history.”

The company’s fiscal Q2 2017 revenue totaled just $334 million, but BlackBerry shares jumped more than 5% in Wednesday’s pre-market session on news that it is shuttering its handset business.